Three of the top five performing sectors in September were fixed income, according to new data.
Across the month, US high yield bonds, European high yield bonds and US government bonds were among the sectors providing investors with the best returns, according to FE Analytics.
US high yield bonds returned 1.55 per cent, while investors in European high yield bonds and US government bonds saw returns of 1.52 per cent.
The top performing sector was Indian equities, returning 4.56 per cent, while funds investing in commodities and natural resources returned an average of 1.94 per cent.
| Fund Sectors – 1 month (top five) | Return % |
| India / Indian Subcontinent | +4.56 |
| Commodity / Natural Resources | +1.94 |
| USD High Yield Bond | +1.55 |
| Eur High Yield Bond | +1.52 |
| USD Government Bond | +1.52 |
Ben Yearsley, director at Shore Financial Planning, said: “The Indian market is always expensive, and remains so today, but seems to justify this with long-term earnings keeping pace with growth in the economy.
“The strong performance of the US dollar helped propel two of the US bond sectors into the top five. Interestingly, one of those was the US High Yield bond sector, which is normally more in tune with a strong economy — maybe suggesting signs of a soft landing.”
Bond funds also featured in the top 10 performing funds over the month of September. T Rowe Price’s Global Government Bond fund returned 6.98 per cent, while PHIM’s Emerging Market Total Return Bond fund returned 6.44 per cent.
Energy funds — such as Guinness Global Energy and BlackRock BGF World Energy — also performed well, returning 8.86 and 7.49 per cent respectively.
At the other end of the table, gold and precious metal funds struggled. The Jupiter Gold and Silver fund lost 8.11 per cent, the Charteris Gold and Precious Metals fund lost 7.32 per cent and the Baker Steel Gold and Precious Metals fund lost 6.74 per cent.
And while bond sectors dominated the top performing sectors, the worst performing sector was the UK Index-Linked Gilt sector, losing 3.48 per cent. Yearsley said this seemed to be the “most volatile of all sectors”.
Consecutive inflows
Bonds have become popular with investors this year. According to Morningstar data, fixed income was the only asset class to have two consecutive months of inflows over the summer and £2.85 billion has been invested in the sector so far this year.
Since the financial crisis, the yield has been too low for many investors (although prices have gradually risen). Now, however, everything has changed, according to Yearsley.
Prices crashed at the end of last year, pushing up yields and offering investors good returns as well as the opportunity for capital gains.
Commentators have said these could look attractive if central banks begin to signal that they have reached the peak of interest rates, as the Bank of England did in September, when it held rates at 5.25 per cent.
Imogen Tew is a freelance financial journalist
